Do you own a house?

We live in Silicon Valley in Northern California, where the cost of living is one of the highest in the US. The only thing one can buy for US$70,000 in our area is a trailer-home. I think the average cost of homes in our area is about $650,000. Ours may sell for about $800,000, and it's a 3br/2ba home with a large front and back yard. Our home is now mortgage free.

That is damn expensive. How is the rental there, for an apartment of 2 rooms?

That home in the picture, depending on amenities, would go for 250,000.00 - 350,000.00 in my small town in New Mexico. My area tends to be on the high side of small town prices. $70,000.00 would get you a decent mobile home here too, if you were renting the space it sat on.

House is costly, but car is very cheap in America, you enjoy driving good car!

c.i. Will you adopt me ?

London is probably one of the more expensive cities in the world for real estate. I have a pretty small house compared to US standards and its current market value is approx $750,000. I do have mortage on it, which I plan to pay off in the next 10 years or so.

what do you mean mortgage in your country?

The Boston area is pretty high too. I live about 7 miles outside of Boston. I own a two bedroom, 2 and a half bath about 1800 sq feet. I paid in the low $200,000s about 7 years ago and it is worth about $400,000.

A condo - $400,000 crazy!

I don't own my house; my house owns me.

i second that! I live in Virginia Beach, VA and the cost of homes in the last 3 years has skyrocketed. We bought our first house for $200,000 and in two years sold it for $290,000. Then we bought our second house in December of 2004 and could probably make close to $175,000 on it if we sold. We did do some remodeling, but we only sunk $40,000 into it.

$70,000 around here might get you a KOA campground membership. Just kidding, you could probably get a 2 br/1ba condo in some of the more run down parts of town.

I did read yesterday that the problem with america today is we are banking on the value of our homes rising, taking out more and more loans against them and using that to fund our spending...sounds slightly scary to me.

dragon, You are correct. Many Americans today are using their homes as their primary investment for their retirement, because they have seen how people got ruined by the stock market during the past 5-6 years. That's a big mistake, because there is no guarantee that their homes purchased with fixed or adjustable rate loans will show any profit. Interest rates are on their way upwards, and the trend will continue that way into the foreseeable future as short-term rates continue on it's upward trend.

i think the biggest worry i have about that is that at some point, people will have more debt against their house than it's worth. that is really scary. some institutions are even lending 105% of the current price assuming the price will go up eventually to cover it. as they say...houses are america's new atms.

and as the guy from a steven seagal movie said:

assumption is the mother of all f**k ups.

There was a timely report on TV yesterday about criminals going into the housing market churning game to make big bucks through fraudulant assessments of houses. The banks are gonna be the big losers. People BEWARE.

dragon49 is right about some to the loans being fools gold. I can't imagine borrowing against a house I don't even own or taking out an interest-only loan, as others do. Sheer lunacy...

We recently took out a second mortgage to get capital to start a business. You won't believe how many lenders were trying to steer us toward an IO. I couldn't imagine just paying interest. All these lenders focus on is your monthly payment will only be $X. Well, at this rate you would never own your house. It is almost like paying rent to the mortgage company.

For $70,000 you won't even get a garage here in southern
California. House prices range from $600 - to 1mill Dollar
and up. Inland is somewhat cheaper but the closer you
get to the coast the more expensive it is. Coastal communities are greatly overprices, but the demand is
there, so the prices go up.....

We paid $150,000 for a 2BR 2BA house on three acres in
North Carolina. We were able to put 40k down and went with an IO loan, because we can afford to put enough away on the side and invest. Taking out an IO without being able to do that is lunacy. I'll let y'all know in about eight years if that was a good idea or not.

well, our second mortgage is an interest only one, we did an 80/10/10 to have enough money to remodel the house which it desperately needed being built in 1965 and NEVER updated. however, i can't imagine owing MORE than your actual house is worth. According to our new appraisal, we have loaned out about 73% of the appraisal. but going in we had a minimum of 10% (actually the house appraised more than we paid so technically more like 15%) in equity. but at no point were we in debt more than we could theoretically sell our house for, that is what scares me (banks lending 105% of house prices!).

what also scares me is that at some point in time whether it be 5 years or 10 years down the line (ARMs or IO) people are going to have paid only interest or extremely low payments because of arms and all of a sudden, bam! they are going to have to refinance to a regular 30 year loan or suffer rising interest rates and may be able to make the payments.

Are we then going to have a significant number of people defaulting on loans, ruining their credit, and hurting banks earnings because they will end up writing these loans off? are housing prices going to go down in real terms (adjusted for inflation?) i am not 100% sure this will happen of course, but i am wary of it.

dragon, You have analyzed the future trend of interest rates correctly, and the impact it will have on those owners on adjustable interest rates and interest only loans. But be careful about how you estimate your equity in your home. The 15% must be reduced for the commission you must pay to the realty agent when selling one's home.

to rent a 1000 sq ft apartment in places like new york, how much is it?